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V2389-20 13 July 2020 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · exención

Requirements for claiming exemption for foreign work (Art. 7 LIRPF)

A company inquired whether its employees deployed abroad to install or repair machinery for foreign clients can claim the foreign work exemption. The DGT confirms this is possible if the work is carried out for non-resident entities in countries with tax regimes analogous to IRPF or with a double taxation avoidance agreement.

The question raised

Question posed: Whether the exemption regulated in Article 7 p) of the Personal Income Tax Law is applicable in the event that displaced employees provide the aforementioned services to client companies (without any link to the applicant, except for the provider-client relationship) domiciled both in countries with which Spain has in force a double taxation treaty (Brazil, Canada, etc.) and in countries with which no such treaty exists.

The DGT's ruling

To apply the exemption under Article 7 p) of the Personal Income Tax Law (LIRPF), the work must be performed for a non-resident entity or a permanent establishment abroad. The worker must physically travel outside of Spain and the workplace must be temporarily located outside the national territory. Furthermore, in the destination country, a tax of an identical or analogous nature to the Personal Income Tax must apply, and it must not be a tax haven. The tax requirement is considered met if there is a treaty with Spain that includes an exchange of information clause.

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